Britain’s power and gas retailers have reportedly convinced D-BEIS in principle to draw up a loan scheme, granting them leeway to fight a potential doubling of consumers’ bills in 2022, powered by soaring wholesale generation costs.
Monday’s emergency meeting between energy secretary Kwarteng and EnergyUK representatives ended without a breakthrough. The Times today reports that industry chiefs were seeking £20 billion in loans to spread the escalating wholesale cost of gas over as much as ten years.
D-BEIS rejected such a sum, but officials are understood to be approaching Rishi Sunak’s Treasury to free up lesser guarantees.
Generators have seen the commodity’s price rise nine-fold on wholesale markets during 2021, ending the year at £4.50 per therm. Such a rise would, in the view of analysts, lead to average dual fuel bills doubling to over £2,400 per year.
On the likely £ 1.8 billion costs of rescuing customers stranded by retailers’ failures, Ofgem gave surviving suppliers the good news last week that the government will shoulder the added costs of firms who’ve rescued customers of this year’s 26 energy retailers forced out of business by the gas crisis. The regulator’s pledge avoids the possibility next April of surviving suppliers passing on SoLR costs bills estimated by the Resolution Foundation at £100 per household.
Government backbenchers worry that Ofgem’s increase due in April of the £1,277 domestic price cap will ratchet up a fast-approaching cost of living catastrophe. Higher NI charges, and tighter restrictions around Universal Credit all spell trouble for the Conservatives in the run-up to local elections on 5 May.
Maverick renewables pioneer Dale Vince is among advocates of a windfall tax on oil and gas extractors in the North Sea who, he said, supply 40% of Britain’s gas.
Ecotricity’s boss told Radio 4s ‘Today’ programme on Tuesday; “The North Sea operators have made a killing in this crisis because they’re getting paid, at times, nine times more than they were last year, and nine times more than they need because the cost of getting gas out of the ground has not gone up”.
“We reckon that North Sea operators have made £20bn in this crisis, and the current cost that the government is looking at for stranded customers is actually £4bn, not £2bn”, Vince said. “But a windfall tax on North Sea operators would easily cover the cost”.
It was “crazy” that customers should be considered to meet increased costs of the gas crisis, Vince said.
EnergyUK confirmed before Christmas that switching by domestic consumers is at its lowest since records began to be published in 2013. Only 139,070 customers changed supplier this November, more than 70% down year-on-year, accelerating October’s 27% dip. The 4.9 million customers who changed supplier in 2021 represents an 11% decrease compared to 2020’s equivalent period; most will have switched early in the year.
Customers increasingly know the cheapest deals on the market are those covered by the price cap. So no financial incentive exists to switch, as customers are advised to stay on these default tariffs in the absence of better deals elsewhere.
“This steep fall is very much as expected given the current situation in the retail market. There’s no financial reason for customers to switch away from default tariffs and this is likely to remain the case in the near future.
“Once we are through the current upheaval, the retail market is going to look very different to how it did earlier in the year”, Cole predicted.